SOLEDAD LEONOR PEA SUATENGCO and ANTONIO ESTEBAN

SUATENGCO, Complainants vs. CARMENCITA O. REYES, Respondent.

G.R. No. 162729 December 17, 2008
Facts: This is an action for Sum of Money with Damages filed by Carmencita
O. Reyes against defendants [petitioners] Spouses Soledad Leonor Pea and
Antonio Esteban Suatengco, wherein plaintiff (respondent) claimed that
sometime in the first quarter of 1994, defendant Sylvia (Soledad) approached
her for the purpose of borrowing a sum of money in order to pay her
obligation to Philippine Phosphate Fertilizer Corporation (PhilPhos).
On May 31, 1994, plaintiff paid Philphos the amount ofP1,336,313.00 and by
reason thereof defendants Spouses Sylvia (Soledad) and Antonio executed
on June 24, 1994 a Promissory Note binding themselves jointly and severally
to pay plaintiff the said amount in 31 monthly installments beginning June 30,
1994.
Of the amount, however, only one (1) payment in the amount of P15,000.00
on July 27, 1994 have been made by defendants; and that pursuant to a
specific clause in the Promissory Note, defendants have unequivocally
waived the necessity of demand to be made upon them to pay.
As of March 31, 1995 defendants owe plaintiff P1,321,313.00 exclusive of
interest, other charges which is already due and demandable but remains
unpaid, hence this collection suit with prayer for moral damages and
attorneys fees.
A perusal of the record showed that notwithstanding the leniency graciously
observed by this court in giving defendants several extensions of time to file
their answer with responsive pleading, they failed to do the same thus, upon
motion of plaintiffs counsel, defendants were declared as in default on
October 27, 1995 and the ex-parte reception of plaintiffs evidence was
delegated to the Clerk of Court.
Thereafter, trial ex parte was delegated to the Clerk of Court to receive
respondents evidence. Testimonial and documentary evidence were all
admitted. RTC rendered decision in favor of plaintiff ordering defendants to
pay plaintiff actual damages in the amount of P1,321,313.00 plus interest at
12% per annum; moral damages in the amount of P1,000,000.00; attorneys
fees in the amount of 20% of the sum collected; and costs of suit.
In their appeal to the CA, petitioners did not question the amount of the
judgment debt for which they were held liable but limited the issue to the
award of attorneys fees.

On October 29, 2003, the CA promulgated a decision affirming with

modification the trial courts decision. It upheld the award of attorneys fees
equivalent to 20% of the balance of petitioners obligation and modified the
decision of the trial court by lowering the award of moral damages from One
Million Pesos (P1,000,000.00) to Two Hundred Thousand Pesos
(P200,000.00). Dispositively, the decision reads:
Petitioners moved for the reconsideration of the CAs decision, but the same
was denied.
Issue: Whether or not the CA erred in affirming the award of attorneys fees
equivalent to 20% of their total indebtedness instead of the over the 5%
stipulated in the promissory note. (Basis is when RTC upheld the oral
evidence of Atty. Edmundo O. Reyes, and disregarding the written
agreement of the parties.)
Held:
The petition is partly meritorious.
The fifth paragraph of the Promissory Note executed by petitioners in
favor of respondent undeniably carried a stipulation for attorneys fees and
interest in case of the latters default in the payment of any installment due. It
specifically provided that:
Failure on the part of Sylvia and/or Antonio
Suatengco to pay any installment due will render the entire
unpaid balance immediately, due and demandable and
Cong. Reyes becomes entitled not only for the unpaid
balance but also for 12% interest per annum of the
outstanding balance of P1,336,313.00 from May 31,
1994 until fully paid plus attorneys fees equivalent to 5% of
the total outstanding indebtedness.

The RTC and CA, in awarding attorneys fees equivalent to 20% of petitioners
total obligation, disregarded the stipulation expressly agreed upon in the
Promissory Note and instead increased the award of attorneys fees by giving
weight and value to the testimony of prosecution witness Atty. Reyes. In
agreeing to the reasonableness of the attorneys fees, the CA erroneously
took into account the time spent, the extent of the services rendered, as well
as the professional standing of the lawyer. Oral evidence certainly cannot
prevail over the written agreements of the parties. The courts need only
to rely on the faces of the written contracts to determine their true
intention on the principle that when the parties have reduced their
agreements in writing, it is presumed that they have made the writings
the only repositories and memorials of their true agreement.
Moreover, it is undeniable from the evidence submitted by
respondent herself to the trial court that the agreement of the parties with
respect to attorneys fees is only 5% of the total obligation and the trial court
granted the 20% rate based on the testimony of respondents counsel who
opined that the same is the reasonable amount of attorneys fees, despite the
unequivocal agreement of the parties.

In sum, we find it improper for both the RTC and the CA to increase
the award of attorneys fees despite the express stipulation contained in the
said Promissory Note which we deem to be proper under these
circumstances, since it is not intended to be compensation for respondents
counsel but was rather in the nature of a penalty or liquidated damages.
WHEREFORE, the Decision dated October 29, 2003 of the Court of
Appeals is hereby MODIFIED in that the amount of attorneys fees is reduced
to five percent (5%) of the total balance of the outstanding indebtedness but
the said Decision is AFFIRMED in all other respects.